What is Accounts Receivable Aging?
An accounts receivable aging report groups unpaid customer invoices by how long they have been outstanding.
An aging report lists each customer's unpaid invoices in time buckets, usually current, 1–30 days past due, 31–60, 61–90 and over 90 days. It is the main tool for managing accounts receivable.
How to use it
- Weekly collections: work from the oldest balances to the newest
- Spot trends: a customer moving from current to 30 days late signals a cash or dispute problem
- Credit decisions: hold new work for customers with long overdue balances
- Cash forecasting: older receivables are less likely to be collected on time
The older it gets, the harder it is
As invoices age, the chance of collecting falls. Set a routine: a friendly reminder shortly after the due date, a call at 30 days past due, a firmer letter at 60, and a decision about collection agencies or write-off at 90.
Reconcile the aging to the balance sheet
The aging report total should equal accounts receivable in the general ledger. If not, look for unapplied payments, credits not matched to invoices or journal entries posted directly to receivables. We reconcile it every month.
Write-offs
When a balance is uncollectible, it may be written off. For accrual-method businesses, it may be deductible as a bad debt; cash-method businesses generally have no deduction because the income was never reported. The IRS explains bad debts; see our guide to writing off bad debts.
Payables aging
The same report exists for accounts payable, showing what you owe by age, which helps plan payment runs. See accounts receivable for small businesses.
Related terms
- Accounts Receivable: Accounts receivable is money customers owe your business for goods or services already delivered.
- Accounts Payable: Accounts payable is the money your business owes suppliers and vendors for goods or services received but not yet paid for.
- General Ledger: The general ledger is the complete record of every transaction posted to every account in a business's books.
- Debits and Credits: Debits and credits are the two sides of every bookkeeping entry; each account type increases on one side and decreases on the other.
Browse more definitions in the small business glossary.
FAQs
Frequently asked questions
What is a healthy accounts receivable aging?
Most balances should be current or slightly past due. Large balances over 60 or 90 days indicate collection problems.
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